S&P 500 analysis: Tesla stock pops as automakers join charging network

Key takeaways

• Ford and General Motors have signed a deal to gain access to Tesla’s Supercharger network from early 2024
• Both automakers will start to build Tesla’s charging connector into their vehicles in 2025 and provide adapters to customers in the meantime
• Cements Tesla’s connector as the industry standard, placing pressure on companies building out charging networks using alternative connectors
• Will improve utilisation and boost income from charging for Tesla, while expanding networks and lowering costs for Ford and General Motors
• Tesla shares jump to 8-month high on the news while General Motors rises to 3-month high
• Ford shares are also rising and at 4-month highs, having risen over 19% since striking its deal last month

Ford and General Motors tap into Tesla charging network

Automotive giants Ford and General Motors have agreed to adopt Tesla’s connector design in an effort to standardise charging methods across North America and have struck deals to gain access to Tesla’s 12,000 Superchargers across the region from early next year.

The deal between General Motors and Tesla has been applauded by markets, with the stocks trading up 3.5% and 4.6% in extended hours trade today, respectively. Ford is up 1.2% and has risen over 19% since signing its own deal with Tesla on May 25.

That has effectively cemented Tesla’s system as the standard charging method considering they are three of the largest electric vehicle makers in the region. That could encourage more consumers to adopt an electric vehicle thanks to a larger, ‘ubiquitous and reliable’ charging network and is likely to pressure other automakers to collaborate and ditch other charging systems. Notably, stocks building out alternative networks are sliding in extended hours today, with ChargePoint down 4%, EVgo down 3.5% and Blink Charging down 1.8%.

‘Not only will it help make the transition to electric vehicles more seamless for our customers, but it could help move the industry toward a single North American charging standard,’ said General Motors chair and CEO Mary Barra.

‘Tesla has led the industry in creating a large, reliable and efficient charging system and we are pleased to be able to join forces in a way that benefits customers and overall EV adoption,’ said Marin Gjaja, the chief customer officer of the Ford Model e. ‘The Tesla Supercharger network has excellent reliability and the NACS plug is smaller and lighter. Overall, this provides a superior experience for customers.’

Previously, Tesla’s 12,000 Superchargers could only be used by Tesla vehicles due to the proprietary connector called the North American Charging Standard, or NACS, but this is now being rolled-out to other companies and unleashing the network to other makes and models. This will involve Tesla providing an adapter so that cars made by Ford and General Motors can hook up to a Supercharger.

Currently, customers driving an electric vehicle made by General Motors or Ford can’t use a Supercharger and have to use other types of chargers that use an array of different connectors. For example, all of the fast chargers in Ford’s network use a widely-used connector known as CCS.

Both automakers will retain access to these chargers, with the Superchargers being added to broaden the network. Ford and General Motors have both said they plan to start building the NACS connector in its cars from 2025, which will rid the need for an adapter to use a Supercharger.

Tesla claims NACS is ‘the most proven in North America’ that offers AC and DC charging in one system. It has no moving parts and is half the size and twice as powerful as the popular CCS connectors currently being used by other automakers.

‘NACS is the most common charging standard in North America: NACS vehicles outnumber CCS two-to-one, and Tesla's Supercharging network has 60% more NACS posts than all the CCS-equipped networks combined,’ Tesla said in a blog last November, when it first said it was opening up its Supercharger network to rival companies.

The US government is pushing for standardisation to help drive its electric vehicle goals, with the country striving to have 500,000 chargers across the country and create an environment so half of all new car sales are electric by the end of this decade. The government said it planned to force companies to use a standard connector earlier this year but media reports suggested it was leaning toward CCS. However, the tie-up between three of the largest automakers could challenge that.

What does this mean for Tesla?

This is great news for Tesla as it means more vehicles will use its Supercharger network, improving utilisation, sourcing new income, and establishing Tesla’s charger as the industry standard. General Motors is working toward a goal of producing one million electric vehicles a year by 2025 while Ford has said it will be building two million electric vehicles annually by the end of 2026. That should see a huge uplift in the number of people using Tesla’s Superchargers over the coming years, providing a sizeable influx of customers.

Supercharging is ‘still a relatively small part’ of Tesla’s business but could be significant over the long-term. While today is all about selling as many cars as possible, Tesla plans to lean more into services in the future when – or if – its self-driving technology takes off, and charging will be vital in the same way that a petrol station is today for vehicles with a combustion engine.

What does this mean for General Motors and Ford?

For General Motors and Ford, the collaboration will significantly expand their charging network and make it easier and more convenient for customers to charge their vehicles, which may encourage adoption and allay concerns over range and the ability to power-up when needed.

It also eases the need to build out or team-up with other companies, which could yield significant savings. General Motors CEO Barra said in an interview with CNBC that the partnership with Tesla could save the company about $400 million.

Where next for TSLA stock?

Tesla shares are on course to rise for an eleventh consecutive session today, with the recent rally having sent the stock to its highest level in eight months. If it closes up today then it will match its longest-ever winning streak that we saw back in January 2021.

The stock can keep climbing back over $250 if it can keep up the momentum, recapturing the ceiling we saw a year ago.

There are risks that this rally will reverse. The share price has climbed significantly above the $182.24 price tag set by the 43 brokers that cover the stock and the RSI is stressing its strongest overbought signal since the stock climbed to all-time highs back in 2021. Investors will hope that the last peak at $214 could provide some support if it does come under pressure. The trough we saw March of $174.50 would then come into play. It is worth noting that the 50-day and 100-day moving averages are converging and that a new bearish signal could emerge if the latter moves above the former for the first time this year.

Take advantage of extended hours trading

Most traders must wait until markets open the before being able to trade the news today. But by then, the news has already been digested and the instant reaction in share price has happened in extended hours. To react immediately, traders should take their positions in pre-and post-market sessions.

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